Labour Chancellor Rachel Reeves delivered her first Budget at the end of October – which was also the first Budget ever delivered by a female Chancellor of the Exchequer, with Britain’s wealthiest people and businesses being asked to pay the most.
National Insurance (NI) payments made by employers are set to rise from April next year, to raise money to fill a £22 billion financial black hole the Government claims was left behind by its Tory predecessors. Other measures include changes to the inheritance tax due on farms passed down to the next generation, which have caused consternation among Britain’s farmers, and changes to Capital Gains Tax (CGT) amounts, as well as various other measures such as a continued freeze on the 5p cut in fuel duty.
What do I need to know?
Many individuals will be no worse off as a direct result of the Budget measures. The personal income tax bands remain frozen at the same level until April 2028, which means you won’t pay more tax immediately. But as your earnings increase, you may be pulled into the higher tax bands, so it could impact you as time goes on.
Capital Gains Tax (CGT) on profits generated by selling shares will rise from 10% to 18% and the higher rate will rise from 20% to 24%. But the CGT rates on selling property will stay the same. You only pay CGT on a property that is not your main residence, and that rate stays at 24% for property gains and income above the basic rate band, and 18% for anything below this.
Inheritance Tax (IHT) thresholds have also been frozen for another two years until 2030, and from 2027, any pension pots that remain unspent and will be passed onto someone else will also become subject to IHT.
How about the State Pension changes, and the minimum wage?
The minimum wage for those over 21 is rising from £11.44 to £12.21 per hour from April 2025, and for 18-to-20-year-olds it will rise from £8.60 to £10 from the same period. The ultimate plan is to achieve a long-term move to a single rate for adults.
The Basic State Pension is rising by 4.1% from April thanks to the “triple lock” as this is the rise in average weekly earnings. This will increase the State Pension from £221.20 per week to £230.25 for the full new State Pension.
One other change was the increased eligibility for the allowance paid to full-time carers, by increasing the maximum earnings threshold from £151 to £195 per week.
Anything else that was announced?
There were many other things announced in the Budget, including that the £2 cap on single bus fares in England will rise to £3 from January. The Government has also committed to fund the tunnelling work to take the HS2 high speed line to Euston station in London.
Air Passenger Duty is set to go up by £2 for short haul flights and £12 for long haul flights from 2026, and rates for private jets will rise by 50%. The Government has also said it will “secure the delivery” of the TransPennine rail upgrade between York and Manchester, which contradicts reports that ministers were planning to cut costs.
An extra £500m will be set aside next year to repair potholes in England, and in a bid to push people towards using electric vehicles, Vehicle Excise Duty – the proper name for car tax – will double in the first year.
There will also be a new tax of £2.20 per 10ml of vaping liquid from October 2026, and there is a 2% above inflation rise on tobacco, and a 10% above inflation rise on hand-rolling tobacco. Tax on non-draught alcoholic drinks will rise by RPI inflation, but draught drinks will see a tax cut of 1.7%.
Contact us
This gives a small flavour of the changes announced in the Budget. If you want to find out anything else or are concerned you may have missed something that is relevant to you, then please get in touch with us and we will do whatever we can to help.
December 2, 2024
Furnished Holiday Lettings tax rules set to change in 2025
The tax regime for Furnished Holiday Lettings (FHLs) is set to be abolished from April 6, 2025, with some key tax breaks being removed by the Chancellor in the Spring Budget on March 6 in a move which could raise as much as £300m extra in tax each year. The changes will make it much harder for individuals providing holiday lets to reclaim some of the key costs associated with their letting business, and could make it more difficult to make these types of lettings profitable.
Around 127,000 properties in the UK were reported as FHLs on the 2019/2020 tax returns, but the measure is designed to encourage those offering their properties for rent as FHLs to instead offer them for long-term rent. These measures could have the desired effect, or it could result in some of those landlords affected deciding to sell up instead as it is expected the regime would bring FHLs in line with the tax treatment of long-term rental properties, but the draft legislation surrounding this change hasn’t yet been announced.
Even so, experts predict the changes could make a big dent in an FHLs current profits. At present, interest on mortgages on FHL properties can be deducted from the rental income for individuals. From April 6, 2025, interest on mortgages for businesses operated by individuals could no longer be deducted if the regime is aligned with longer-term rental property. Instead, a 20% tax credit would be given against the owner’s tax liability, which for higher rate taxpayers will reduce the tax relief for interest to 20%, rather than 40%.
What else will change?
FHLs owned by individuals currently enjoy a lower capital gains tax on their sale as they are classified as trading assets which are subject to business asset disposal relief when they are sold. This means that where the FHL qualifies, with gains up to the lifetime limit of £1m, they would be taxed at 10%.
From April 6, 2025, the business asset disposal relief won’t be available on FHLs owned by individuals, so they will face CGT of 18% of profits in the standard rate band, or 24% for profits in the higher rate band once the property is sold.
Also, under the current regime, FHLs would qualify for CGT rollover relief if a “replacement qualifying asset” is bought with the proceeds of the sale. But this benefit will also be removed from April 6, 2025.
Are there other allowances that will be removed?
Other changes that allow the offset of running costs could also impact the profitability of FHLs. Under the current regime, any expenditure on an FHLs can get tax relief as capital allowances. This will also be removed from April 6, 2025, although there may still be a way of reclaiming the cost of replacing domestic items against profits. Landlords can claim tax relief for replacing broken furniture and other domestic items under the Replacement of Domestic Items Relief, but this doesn’t apply to furnishing a property at the start, only for items that need to be replaced.
Toby Tallon, Tax Partner at professional services and wealth management group Evelyn Partners, said: “For second homeowners who like to make extra money out of their holiday home by putting it on AirBnB while they are not using it, it will simply make this a less lucrative ‘side hustle’. If that is a make-or-break issue for them and they don’t want to be long-term private landlords, then we could see some of these properties being sold.
“Recent changes to other areas of tax have benefitted FHL owners, which may have influenced the Government in its decision to withdraw the benefits. FHLs qualified for capital allowances, so the full expensing change last year increased tax deductions available to owners. During the pandemic, FHLs that paid business rates became eligible for grants targeted at small businesses. The rules to qualify for business rates rather than council tax were tightened in 2023. For those registered for VAT, they were also eligible for the temporary reduced rate of VAT for hospitality businesses.”
None of these changes will apply to FHLs owned through a company structure, so these properties would not be affected. We will have to wait to see the draft legislation until we know exactly what the impact of the changes will be on individuals running FHLs.
We can help you
If you own an FHL and want to find out what your options are before the rules change, then please get in touch with us and we will be happy to help you.
April 22, 2024
Budget changes and what they mean for you
The Chancellor, Jeremy Hunt, delivered his Budget statement to Parliament on March 6, and there were various changes that should benefit individual taxpayers and businesses.
One of the biggest announcements, which takes effect from April 6, is a further reduction in the rate of National Insurance Contributions (NICs). From this date, Class 1 employee NICs will fall from 10% to 8%, while NICs for the self-employed will be cut by an additional 2p on top of the 1p announced in the Autumn Statement. This means that from April 6, 2024, the rate of Class 4 NICs will fall from 9% to 6%.
Companies will need to begin updating their payroll software soon if they haven’t already done so, to accommodate these changes.
High Income Child Benefit Charge threshold raised
The Chancellor also raised the threshold at which Child Benefit is removed for higher earners. The High Income Child Benefit Charge will rise to £60,000 from April 6, and will taper up to £80,000. So, for every £200 of income that exceeds this £60,000 limit, the charge will be 1% of Child Benefit, and when your income exceeds £80,000, the charge will equal the Child Benefit payment.
Any new Child Benefit claims made after April 6 this year and before July 8 this year will have the payments backdated, but they will be subject to the charge in the 2024/25 tax year if your income is above £60,000. A claim made in May, for example, would be backdated to February, but you would only pay the charge on this if your income is above the new £60,000 threshold.
Any business owner with employees interested in claiming Child Benefit, or who want to restart Child Benefit payments if they have opted out in the past, can share this new guidance on the charge with them.
Child Benefit claims will automatically be backdated for three months, or to the date of birth of the child if later. Anyone wanting to make a claim for Child Benefit who isn’t currently receiving it can make the claim in the HMRC app or online.
New £5,000 extra ISA allowance to boost UK businesses
The Individual Savings Account (ISA) allowance was kept at £20,000 once again in the Budget – it hasn’t changed since the 2017/18 tax year – but the Chancellor did add to the ISA stable for those who are interested in investing solely in UK companies. The UK ISA – which is also being called the ‘British ISA’ or ‘Great British ISA’ allows investors to put an extra £5,000 into an ISA that supports UK businesses.
The aim is to help boost the London Stock Exchange, according to some commentators, but whether this will be effective remains to be seen.
Jason Hollands, Managing Director of Bestinvest, the online investment service owned by wealth manager Evelyn Partners, said: “The ‘British ISA’ is undoubtedly a victory for the City stockbrokers and bankers who have lobbied hard for it amid a drought in IPO and deal fees and a worrying sapping of companies listed in London to New York.
“However, I am doubtful it will drive anything like the increased flows into UK equities being talked about. Proponents claim it might drive £200 billion extra cash into UK equities over five years, but it is hard to reconcile such a figure with the fact that the existing, larger ISA £20,000 allowance attracted a lesser amount into Stocks & Shares over the last five years according to data disclosed by HMRC.”
Mr Hollands added that a relatively modest number of people currently fully use their existing £20,000 allowance and a logical step for those who will be in a position to do so and also make use of the ‘British ISA’ “will be to commit less to UK equities in their main allowance to compensate”.
What else was announced in the Budget?
Other announcements made by the Chancellor included an increase in the VAT threshold for companies from the current £85,000 to £90,000 from April. This is the point at which a company needs to formally register for VAT.
The Chancellor also removed the ‘non-dom’ status which allows people living in the UK but who consider their permanent home to be overseas, to benefit from tax exemptions, especially on foreign investments. Foreign workers and students have benefited from these, but it has been particularly useful for the wealthiest individuals who have been able to use this status to not pay tax on their worldwide income, said Rachael Griffin, tax and financial planning expert at Quilter.
She added: “People who use the remittance basis of tax, i.e. only pay UK tax on the income or gains that are brought to the UK, typically are well advised and therefore with the help of their adviser will be able to find creative ways to mitigate their UK tax liabilities regardless of the change in rules.”
The expected boost to tax revenue from this change is around £3.8 billion. But there is a chance that the rule change could discourage some wealthy people from living in or investing in the UK, even though other reasons for living here, such as political stability and the UK legal system, may encourage some of those affected to remain, said Ms Griffin.
Contact us
If you want to know how any of these or other measures announced in the Budget might affect you, then please get in touch with us and we would be delighted to help you understand your tax position.
Chancellor Jeremy Hunt delivered his ‘Budget for Long Term Growth’ on Wednesday 6 March 2024. His speech promised ‘more investment, more jobs, better public services and lower taxes’.
Lowering taxes
The Chancellor made further changes to National Insurance contributions (NICs), following the cuts made in the Autumn Statement 2023. The rates for NICs will be cut further for both employees and the self-employed from 6 April 2024.
There was also a cut in the higher rate of Capital Gains Tax on residential property disposals and the creation of a new ISA allowance to encourage investment in promising UK businesses.
The Chancellor has responded to pressure from business groups by raising the threshold for VAT registration to £90,000 and announcing his intention to extend Full Expensing to leased assets.
Making it possible
The Chancellor made his cuts possible with a series of tax-raising measures. These included a new regime for non-doms, the abolition of the Furnished Holiday Lettings tax regime and Multiple Dwellings Relief, alongside a new duty on vaping and an increase in tobacco duty.
The basic rate of tax is 20%. For 2024/25 the band of income taxable at this rate is £37,700 so that the threshold at which the 40% band applies is £50,270 for those who are entitled to the full personal allowance.
The basic rate band is frozen at £37,700 until April 2028. The National Insurance contributions upper earnings limit and upper profits limit will remain aligned to the higher rate threshold at £50,270 for these tax years as well.
For 2024/25, the point at which individuals pay the additional rate of 45% is £125,140.
The additional rate for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland. The additional rate for savings and dividend income will apply to the whole of the UK.
Scottish residents
The tax on income (other than savings and dividend income) is different for taxpayers who are resident in Scotland from that paid by taxpayers resident elsewhere in the UK. The Scottish income tax rates and bands apply to income such as employment income, self-employed trade profits and property income.
In 2024/25 a new 45% rate will be introduced, making six income tax rates which range between 19% and 48%. Scottish taxpayers are entitled to the same personal allowance as individuals in the rest of the UK.
Welsh residents
Since April 2019, the Welsh Government has had the right to vary the rates of income tax payable by Welsh taxpayers (other than tax on savings and dividend income). The UK government has reduced each of the three rates of income tax paid by Welsh taxpayers by 10 pence. For 2024/25 the Welsh Government has set the Welsh rate of income tax at 10 pence which has been added to the reduced rates. This means the tax payable by Welsh taxpayers is the same as that payable by English and Northern Irish taxpayers.
The personal allowance
The income tax personal allowance is fixed at the current level until April 2028 at £12,570.
There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000. The reduction is £1 for every £2 of income above £100,000. This means that there is no personal allowance where adjusted net income exceeds £125,140.
The government will uprate the married couple’s allowance and blind person’s allowance for 2024/25.
The marriage allowance
The marriage allowance permits certain couples to transfer £1,260 of their personal allowance to their spouse or civil partner.
Comment
The marriage allowance reduces the recipient’s tax bill by up to approximately £250 a year. To benefit from the marriage allowance one spouse or civil partner must normally have no income or income below the personal allowance for the year. Since the marriage allowance was first introduced there are couples who are entitled to claim but have not yet done so. It is possible to claim for all years back to 2019/20 where the entitlement conditions are met. The total tax saving for all years up until 2022/23 could be over £1,000. A claim for 2019/20 will need to be made by 5 April 2024.
Tax on savings income
Savings income is income such as bank and building society interest.
The Savings Allowance applies to savings income and the available allowance in a tax year depends on the individual’s marginal rate of income tax. Broadly, individuals taxed at up to the basic rate of tax have an allowance of £1,000. For higher rate taxpayers the allowance is £500. No allowance is due to additional rate taxpayers.
Savings income within the allowance still counts towards an individual’s basic or higher rate band and so may affect the rate of tax paid on savings above the Savings Allowance.
Some individuals qualify for a 0% starting rate of tax on savings income up to £5,000. However, the rate is not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income, less allocated allowances and reliefs) exceeds £5,000.
Tax on dividends
Currently, the first £1,000 of dividends is chargeable to tax at 0% (the Dividend Allowance). This will be reduced to £500 for 2024/25.
These changes will apply to the whole of the UK.
Dividends received above the allowance are taxed at the following rates for 2024/25:
8.75% for basic rate taxpayers
33.75% for higher rate taxpayers
39.35% for additional rate taxpayers.
The Corporation Tax due on directors’ overdrawn loan accounts is paid at 33.75% and remains unchanged.
Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the Dividend Allowance.
To determine which tax band dividends fall into, dividends are treated as the last type of income to be taxed.
Pension tax limits
A number of changes were made to the tax regime for pensions for 2023/24:
The Annual Allowance (AA) is £60,000.
Individuals who have ‘threshold income’ for a tax year of greater than £200,000 have their AA for that tax year restricted. It is reduced by £1 for every £2 of ‘adjusted income’ over £260,000, to a minimum AA of £10,000.
No Lifetime Allowance (LA) charge.
The AA and threshold and adjusted income levels will remain the same for 2024/25.
As previously announced the LA of £1,073,100 will be abolished from 2024/25. Changes have been made to clarify the taxation of lump sums and lump sum death benefits, and the application of protections, as well as the tax treatment for overseas pensions, transitional arrangements, and reporting requirements.
Individual Savings Accounts
The government is freezing the limits on Individual Savings Accounts (ISAs) (£20,000), Junior Individual Savings Accounts (£9,000), Lifetime Individual Savings Accounts (£4,000 excluding government bonus) and Child Trust Funds (£9,000) for 2024/25.
The government announced that it is looking to introduce the UK ISA. This will have a new ISA allowance of £5,000 in addition to the existing ISA allowance, and will provide a new tax-free savings opportunity for people to invest in the UK.
High Income Child Benefit Charge
The High Income Child Benefit Charge (HICBC) is a tax charge that applies to higher earners who receive Child Benefit, or whose partner receives it.
The government is increasing the income threshold at which HICBC starts to be charged from £50,000 to £60,000 from April 2024. The rate at which HICBC is charged will be halved from 1% of the Child Benefit payment for every additional £100 above the threshold to 1% for every £200. This means that Child Benefit will not be withdrawn in full until individuals have ‘adjusted net income’ of £80,000 or more.
Comment
The government estimates 485,000 families will gain an average of £1,260 towards the cost of raising their children in 2024/25. 170,000 families will be taken out of paying the tax charge.
In addition, the government plans to administer the HICBC on a household rather than individual basis by April 2026, with a consultation in due course.
Non-UK domiciled individuals
From 6 April 2025, the current remittance basis of taxation for non-UK domiciled individuals will be abolished and replaced with a residence-based regime. Individuals who opt into the new regime will not pay UK tax on any foreign income and gains arising in their first four years of tax residence, provided they have been non-tax resident for the last ten years. Anyone who has been tax resident in the UK for more than four years will pay UK tax on their foreign income and gains.
The government will also introduce the following transitional arrangements for existing non-UK domiciled individuals claiming the remittance basis:
an option to rebase the value of capital assets to 5 April 2019
a temporary 50% exemption for the taxation of foreign income for the first year of the new regime (2025/26)
a two year Temporary Repatriation Facility to bring previously accrued foreign income and gains into the UK at a tax rate of 12%.
The government will also reform Overseas Workday Relief for employment duties carried out overseas.
Inheritance Tax (IHT) is currently a domicile-based system. The government announced the intention to move to a residence-based system, subject to consultation, but no changes to IHT will take effect before 6 April 2025.
The Chancellor has previously announced major changes to the National Insurance contributions (NICs) system.
Employees and NICs
Following the Autumn Statement in 2023 the government cut the main rate of Class 1 employee NICs from 12% to 10% from 6 January 2024. The government has further cut the main rate of Class 1 employee NICs from 10% to 8% from 6 April 2024.
Comment
According to the government, building on changes made at the Autumn Statement the government has cut taxes again for 29 million people with the average worker on £35,400 receiving a cut in 2024/25 of over £900.
The self-employed and NICs
The self-employed generally have to pay two forms of NICs: Class 2 and Class 4.
Firstly, the government will amend Class 2 self-employed NICs from 6 April 2024. This means that, from 6 April 2024:
Self-employed people with profits above £6,725 will continue to get access to contributory benefits, including the State Pension, through a National Insurance credit, without paying NICs.
Those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension will continue to be able to do so.
Comment
This will mean that a self-employed person who currently pays Class 2 NICs will save at least £192 per year.
Secondly, the government will cut the main rate of Class 4 self-employed NICs from 9% to 6% from 6 April 2024.
Comment
This will benefit around two million individuals, recognising the contribution of the self-employed to the economy and ensuring that work pays for all.According to the government, combined with the removal of the requirement to pay Class 2 NICs, this will save an average self-employed person on £28,000 £650 a year.
Extension of NICs relief for hiring veterans
The government is extending the employer NICs relief for businesses hiring qualifying veterans for a further year from April 2024 until April 2025. This means that employers will continue to pay no employer NICs up to annual earnings of £50,270 for the first year of a qualifying veteran’s employment in a civilian role.
National Living Wage and National Minimum Wage
The government has accepted in full the recommendations of the Low Pay Commission and announced increased rates of the National Living Wage (NLW) and National Minimum Wage (NMW) which will come into force from 1 April 2024. In addition, from 1 April 2024 the NLW will be extended to 21 and 22 year olds. The rates which will apply from 1 April 2024 are as follows:
NLW
18-20
16-17
Apprentices
From 1 April 2024
£11.44
£8.60
£6.40
£6.40
The apprenticeship rate applies to apprentices under 19 or 19 and over in the first year of apprenticeship. The NLW applies to those aged 21 and over.
Comment
The Department for Business and Trade estimates 2.7 million workers will directly benefit from the 2024 National Living Wage increase.
Taxable benefits for company cars
The rates of tax for company cars remain frozen for 2024/25. Future car benefit rates have been announced for 2025/26 to 2027/28:
For 2025/26, the rates for emissions under 75gm/km increase by 1%.
For 2026/27, the rates for emissions under 75gm/km increase by a further 1%.
For 2027/28, the rates for emissions under 75gm/km increase by a further 1%.
The charge for electric cars will rise from 2% to 5% over that period.
For cars with emissions of 75gm/km and above, there will be a 1% rise in 2025/26 only, subject to a maximum of 37%.
From 6 April 2024 the figure used as the basis for calculating the benefit for employees who receive free private fuel from their employers for company cars remains £27,800.
Company vans
For 2024/25 the benefit remains £3,960 per van and the van fuel benefit charge where fuel is provided for private use remains £757. If a van cannot in any circumstances emit CO2 by being driven, the cash equivalent is nil.
The government has confirmed that the rates of Corporation Tax will remain unchanged, which means that, from April 2024, the rate will stay at 25% for companies with profits over £250,000. The 19% small profits rate will be payable by companies with profits of £50,000 or less. Companies with profits between £50,001 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective Corporation Tax rate.
Capital allowances
The Full Expensing rules for companies allow a 100% write-off on qualifying expenditure on most plant and machinery (excluding cars) as long as it is unused and not second-hand. The rules were originally designed to be effective for expenditure incurred on or after 1 April 2023 but before 1 April 2026. Similar rules apply to integral features and long life assets at a rate of 50%. The government announced in the Autumn Statement 2023 that both allowances will be made permanent.
The government is to publish draft legislation for consultation to help consider any potential extension to include plant and machinery for leasing.
The Annual Investment Allowance (AIA) is available to both incorporated and unincorporated businesses. It gives a 100% write-off on certain types of plant and machinery up to certain financial limits per 12-month period. The limit remains at £1 million.
Transfer of assets abroad – anti-avoidance legislation
The Transfer of Assets Abroad (ToAA) provisions will be amended so that UK resident individuals cannot bypass the legislation, by using a company to transfer assets offshore in order to avoid tax. Transfers of assets by certain companies will be considered a relevant transfer for the purposes of the legislation. The new measure will apply to income arising to persons abroad on or after 6 April 2024.
Creative Industries
The government has announced additional support for UK independent films already eligible for the Audio-Visual Expenditure Credit (AVEC). The AVEC is currently set as a basic credit of 34% of qualifying expenditure. Companies with qualifying UK independent films with a budget of £15 million or less will be able to claim a new UK Independent Film Tax Credit (IFTC) of 53%. Qualifying expenditure will be capped at 80% of the film’s total core expenditure. Qualifying films will need to commence principal photography on or after 1 April 2024 and claims can be made from 1 April 2025.
Comment
The maximum IFTC claim will be £6,360,000.
Separately, from 1 April 2025, companies with qualifying visual effects costs will be able to claim an increased AVEC of 39%, a 5% increase on the basic credit. The 80% cap will also be removed for qualifying visual effects costs.
For Theatre Tax Relief, Orchestra Tax Relief and Museums and Galleries Tax Relief, the temporary rates of 40%/45% for non-touring/touring and orchestral productions will be made permanent from 1 April 2025.
Furnished Holiday Lettings
The Furnished Holiday Lettings (FHL) tax regime will be abolished from April 2025. Draft legislation is to be published and will include anti-forestalling measures that will apply from 6 March 2024. The effect of abolishing the rules will be that short-term furnished holiday lets and longer-term residential lets are treated the same for tax purposes and individuals will no longer need to report the two income streams separately.
Research and Development relief
As announced in the Autumn Statement 2023, the existing Research and Development Expenditure Credit (RDEC) and SME schemes will be merged, with expenditure incurred in accounting periods beginning on or after 1 April 2024 being claimed in the merged scheme. The rate under the merged scheme will be set at the current RDEC rate of 20%.
The changes also provide additional relief for loss-making Research and Development (R&D) intensive SMEs through a higher rate of payable tax credit from April 2023, as a feature of the existing SME scheme. Those entitled to this higher rate would, from April 2024, continue to claim under rules similar to the current SME scheme rather than under the new RDEC scheme.
A number of other changes will apply to the new regime from April 2024, including that R&D claimants will no longer be able to nominate a third-party payee for R&D tax credit payments, subject to limited exceptions.
Comment
Further action may be needed to reduce the unacceptably high levels of non-compliance with the R&D rules and HMRC will be publishing a compliance action plan.
Making Tax Digital for income tax
The government has announced the outcome of the review into the impact of Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) on small businesses and intends to proceed with implementation from April 2026. The government will also ensure taxpayers who join MTD from 6 April 2024 are subject to the government’s new penalty regime for the late filing of tax returns and late payment of tax.
Business Rates
The small business multiplier will be frozen for another year, while the 75% Retail, Hospitality and Leisure relief will be extended for 2024/25. The standard multiplier will be uprated in line with the Consumer Prices Index for September 2023. These changes will take effect from 1 April 2024 in England.
Freeports and Investment Zones
Both regimes allow businesses in specific locations to benefit from a number of reliefs including Stamp Duty Land Tax relief, enhanced capital allowances, structures and buildings allowances and secondary Class 1 NIC relief for eligible employers.
As announced in the Autumn Statement 2023, the government will extend the window to claim the tax reliefs available in Freeport special tax sites from five to ten years. The extension to the sunset dates will be enacted by secondary legislation and have been confirmed as:
30 September 2031 for special tax sites in respect of English Freeports
30 September 2034 for special tax sites in respect of Scottish Green Freeports and Welsh Freeports.
Other
Other announced changes include:
Making the cash basis of accounting the default position for the self-employed from 2024/25, with an alternative to opt for the accruals basis, together with technical changes to the regime.
A number of changes to strengthen the Construction Industry Scheme from April 2024.
The Capital Gains Tax (CGT) rate remains at 10%, to the extent that any income tax basic rate band is available, and 20% thereafter.
Higher rates apply for certain gains, mainly chargeable gains on residential properties, with the exception of any element that qualifies for Private Residence Relief. These rates are changed from 18% and 28% in 2023/24 to 18% and 24% in 2024/25.
There is still potential to qualify for a 10% rate on gains up to £1 million under Business Asset Disposal Relief and £10 million under Investors’ Relief.
CGT annual exemption
The government has announced that the CGT annual exempt amount will be reduced from £6,000 to £3,000 from 6 April 2024.
Inheritance Tax nil rate bands
Despite much speculation before the Budget, Inheritance Tax (IHT) has not been abolished. The nil rate band has been frozen at £325,000 since 2009 and this will now continue up to 5 April 2028. An additional nil rate band, called the ‘residence nil rate band’ is also frozen at the current £175,000 level until 5 April 2028.
Changes to Agricultural Property Relief and Woodlands Relief
To ensure compatibility with EU law, action was taken many years ago to expand the scope of Agricultural Property Relief (APR) and Woodlands Relief to property located in the European Economic Area. Following Brexit, this measure reverses those changes and also removes APR from property in the Channel Islands and Isle of Man. Broadly, the changes take effect from 6 April 2024.
Environmental land management and ecosystem service markets
The government is undertaking significant reform of agricultural policy and spending in England.
At Budget 2023, the government published a consultation exploring elements of the tax treatment of environmental land management and ecosystem service markets. Following consideration of the responses, the government has decided:
to extend the existing scope of APR from 6 April 2025 to land managed under an environmental agreement with, or on behalf of, the UK government, Devolved Administrations, public bodies, local authorities, or approved responsible bodies and
not to restrict APR to tenancies of at least eight years.
After many years of having been frozen, the government will increase the VAT registration threshold from £85,000 to £90,000 and the deregistration threshold from £83,000 to £88,000 from 1 April 2024. The government has stated that these new thresholds will be frozen but has not stated for how long.
Stamp Duty Land Tax changes
A number of changes are made to the Stamp Duty Land Tax (SDLT) regime. These include the following:
The abolition of Multiple Dwellings Relief, broadly from 1 June 2024 but subject to transitional rules, for purchasers of residential property in England and Northern Ireland.
Changes to First-Time Buyer Relief to extend it to individuals buying a new residential lease via a nominee or bare trust for transactions with an effective date (usually the date of completion) on or after 6 March 2024, but subject to transitional rules.
Public bodies in England and Northern Ireland will be removed from the scope of the 15% SDLT higher rate charge where the effective date of transaction (usually the date of completion) is on or after 6 March 2024.
Simplification measures
The government has announced a package of measures that supports its ambition to simplify and modernise the tax system, which includes the following:
To simplify the process for employees claiming tax relief on their expenses, and for HMRC to automatically process claims, the government is designing a new, online service for employees to claim tax relief on all of their expenses in one place.
The government will mandate the reporting and paying of income tax and Class 1A NICs on benefits in kind via payroll software from April 2026.
The government will legislate to introduce a route for people to apply for National Insurance Credits for parents and carers for tax years where they have not claimed Child Benefit, to ensure that people do not miss out on their State Pension entitlement.
Other changes
The alcohol duty freeze will be extended until February 2025.
The temporary 5p cut in fuel duty rates will be extended until March 2025 and the planned inflation increase for 2024/25 will not take place.
A new duty on vaping products will be introduced from 1 October 2026. The government will also introduce a one-off tobacco duty increase from the same date.
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